Why Apple Does Not Want the iPhone Unlocked and What It Means for Us

Apple locking down the iPhone exclusively to AT&T means a lot of things for us as consumers and a lot of things for Apple. While it is a smart move on Apple’s part, there still are some very serious side effects that will have wireless providers crying themselves to sleep should the iPhone gain dominance. It will bring forth a new era in the world of cell phones.

Integration, Mobilization, Simplification
Keep in mind I will be focusing on the U.S. a lot here, as I’m not too familiar with Europe’s Cellular Providers.

We are no stranger to Apple locking down products to work within a predefined selection of devices. It happened with the iPod & iTunes, Macs & OS X, and now the iPhone & AT&T. We do get some benefits from this: knowing that Apple products will work seamlessly with other Apple products and integrate themselves across the company’s product range. However, this is nothing more than a side effect of Apple wanting to make money off of their closed ecosystem of products.

It’s a good way to bolster Apple’s success because consumers will want to buy products that work exclusively with their Macs, iPods, and iPhones. Other manufacturers attempt the same thing, making their products work well or better together.

This time it’s totally different; previously Apple controlled the entire platform and the existing additions. Now they only control one part of the equation; they provide the device and AT&T provides the network. Apple does not own AT&T and the tactics they employed to get a carrier have upset others, creating an image of greed when it comes to Apple.

The thing is, though, we get an enhanced level of integration with AT&T, such as Visual Voicemail and cheaper data plans, but it ends there. This doesn’t mean that this could’ve been the case with other carriers and is a weak argument that won’t hold up. This is the equivalent of choosing which power adapter your Mac can use and where it can be charged; the iPhone functions are currently tethered to a contract and cannot be used without one, so equating a Mac’s supply of power is a valid comparison.

AT&T isn’t the only GSM provider, but it was the only provider to accept Apple’s seemingly outrageous proposal. Who in their right mind would upgrade their entire network to accommodate one phone from a company who knows nothing about the wireless world? Perhaps AT&T is seeing a lot of potential and that the positives far outweigh the negatives.

But the lock down was important to Apple for one reason: to track iPhone users. No, I don’t mean track as in where you are and what you’re doing, but by tracking which provider you use for your iPhone. Apple is supposedly getting a cut from AT&T every month, not only from iPhone sales but from monthly payments. While it is an analyst’s guess, I do believe it’s credible for a few reasons, one of them being Software Updates; Apple needs to pay the developers somehow, but it would be a fraction of the monthly AT&T sum.

Do you think Apple would want an iPhone running rampant on T-Mobile’s network if they haven’t met their demands? No, it means a loss of income from that user and it means Apple loses the exclusivity with AT&T.

The Benefits (?)
However, there are some benefits to this monopolistic-like role Apple is employing, but these positive points could easily be shattered by the decisions of a few CEOs.

The main benefits to getting a closed deal like Apple did with AT&T are improvements and stability, but here is the real kicker: no other cell phone manufacturers would be able to take advantage of this. Carriers can’t decide to carry the iPhone and attempt to be a competitor. This is a situation where you have to have the iPhone, and carrying it would be extremely beneficial but it would require a lot of changes.

If it wasn’t for the iPhone we probably wouldn’t have faster EDGE speeds or anything close to Visual Voicemail. Should a new carrier, after the 5-year exclusivity ends, pick up the iPhone, Apple would most likely force them to improve their network, both data and calling, which is beneficial to even non-iPhone owners.

The other benefit is cell phone manufacturers now have 5 years to inspect the competition and learn from the iPhone. They should consider integrating themselves more and more into different networks in order to create an appeal and brand themselves amongst consumers.

Comments

I have no real issues with this article except that “monopolistic” is misused.

Using the word “monopoly” implies that there are no alternatives. Seeing as how Palm, Blackberry and numerous Windows Mobile devices are competitors and the iPhone is likely to get 5% of the entire mobile market in the most optimistic conditions hardly qualifies them as a monopoly.

They are using AT&T as sole-source provider… but that has nothing to do with being a “monopoly”.

Just as Martha Stewart and Kmart have a sole-source agreement for some of the Martha Stewart houseware items, that doens’t make either of them a monopoly in the housewares market.

You are using some semantically loaded words here: “closed ecosystem of products” & “this monopolistic-like role Apple is employing” when you really mean the word proprietary. Are Apple’s competitors less proprietary than Apple? No, they have merely accepted a different business plan than Apple and AT&T is initiating. Apple is used to upsetting customary practice. Many of Apple’s customers appreciate that Apple does this. Most of the criticism of the iPhone are recycled anti-iPod arguments and hence are worthless.

You substitute the phrase “creating an image of greed” for acting in one’s self interests. Aren’t the current phone manufacturers acting in their self interest? Yes. The point is whether Apple’s new business plan benefit’s the consumer’s self interests. Given the response to the iPhone, I suspect that Apple has. Most mobile phone users dislike their phones and their service providers. If Apple and AT&T can change that perception; then they will gain huge sales. What’s wrong with that?

You use “Apple’s seemingly outrageous proposal” when you mean that Apple is choosing to change common business practice in mobile phones. Currently, mobile phone are subsidized by the carriers. Apple is not getting a subsidy for the iPhone; it is charging full price. This means that AT&T can charge less for the monthly service. This is paradigm shiting behavior. Apple does this; it upset other businesses apple carts. Accept it, It’s called competition. It is a good thing, in the main, when it offers the consumers more choice.

Writers often make a big deal about the iPhone being locked to AT&T when most mobile phones are sold that way. Verizon uses a different hardware system; Apple could not create a system that could be used on both. Only T-mobile uses GSM in the US.

Nor is it a problem that Apple may be geting part of the monthy service fee. That means that Apple can provide regular software upgrades as part of the monthly service.

Windows is a monopoly - a situation where the vendor’ proprietary actions define market conditions to the detriment of any others. Apple’s deal with AT&T is exclusivity, a highly desirable marketing condition for AT&T and less so for Apple, unless Apple receives (highly likely) significant payments for this exclusivity. This situation is not unusual in any industry.

Unlike Windows in the corporate world, if you want to use another product, another vendor, even another technology (CMDA vs. GSM), then go for it - AND it will seamlessly integrate across the board.

If you don’t like the iPhone, go someplace else, use some other product, utilize your freedom of choice. But leave Apple/AT&T alone. They are not holding a gun to your head to buy their product/service, nor telling you that, if you chose an alternative product, we will ostracize you from interacting with iPhone.

Free market economies, freedom of choice, and capitalism rule. As you indicated, it is nice to see a device with such consumer acceptance, that a major services vendor is forced to upgrade their environment to the benefit of consumers - all [AT&T] consumer, not just iPhone ones.

Steve Jobs has longed loathed the carriers control of the cellphone features, capabilities allowed, and music and video downloads, and would prefer, longterm, that the iPhone become “unlocked” and therefore carrier-free. The iPhone will have to eventually be unlocked for Europe and Asia, anyway.

But the iPhone could not work without a carrier deal. Remember how the US and European carriers refused to deal with Apple? Apple had to get this paradigm-shifting device into people’s hands and therefore had to have a deal with a carrier. Remember T-Mobile’s and Verizon’s refusal to negotiate with Apple. The AT&T therefore required an “exclusive”...and that is no surprise.

But…if a third party, or even Congress “unlocks” the iPhone…then that’s not Apple’s fault for violating the exclusive contract with AT&T, and Apple would not need AT&T exclusively any more. Notice the “iPhone” hearings in Congress and the “Free the iPhone” movement in Congress?

Had Apple made the iPhone available to all cell companies, the number of sales would have been split between them, and I think it is doubtful that without the onslaught that was brought on by a single carrier, we wouldn’t have gotten the upgraded system as was mentioned in the article. Giving a single company all that new business was the condition to get the system updated. Check and mate.

It appeared to be a thoughtful article until it sidetracked to “Apple locking down devices” in Paragraph 3, and then I saw the all too familiar “closed ecosystem of products.” I stopped reading the article.

The use of words on the authors part are quite accusatory, in my view and the article not worth my time in reading.

To me the views of the author “are locked” into a “closed” way of thinking.

I disagree with the comparison in the sixth paragraph. For it to be a valid, the nation’s electrical outlets would have to be on several separate standards (different plugs and voltages) and Apple would not be providing universal power adapters. Or course, even with our standard power grid, some outlets give you less power or no power.